SGB redemption price set at Rs 14,614, a 192% gain

The Reserve Bank of India has fixed the premature redemption price for Sovereign Gold Bond (SGB) 2020-21 Series VII at Rs 14,614 per unit for October 19, 2026, The Economic Times reported, citing an RBI statement. The payment date falls a day before October 20 because that date is a holiday.

The tranche, issued on October 20, 2020, carried an online purchase price of Rs 5,001 per gram. Investors who bought at that price would receive a capital gain of Rs 9,613 per unit on redemption, equivalent to an absolute return of 192.21%, excluding interest.

What the Rs 1 lakh illustration means

At that rate of appreciation, an investment of approximately Rs 1 lakh would have a redemption value of about Rs 2.92 lakh. This is an illustrative comparison based on the online issue price, rather than a statement of any individual investor’s holdings.

The 192.21% figure measures the cumulative price gain over the holding period; it is not an annualised return. It also leaves out the bond’s fixed interest of 2.50% a year on the initial investment, which is separate from the increase in redemption value.

How the redemption price was determined

The RBI statement cited in the report says the redemption value uses the simple average of closing prices for gold of 999 purity published by the India Bullion and Jewellers Association. The calculation takes the three working days preceding redemption.

For this tranche, the Rs 14,614 price is based on gold prices for October 14, 15 and 16, 2026. The reported premature redemption rules allow investors to exit after the fifth year from issuance, on a date when interest is payable.

Other October redemption dates

Two other tranches have premature redemption dates later in the month: SGB 2020-21 Series I, issued on April 28, 2020, on October 28; and SGB 2019-20 Series VI on October 30.

SGBs are government securities denominated in grams of gold, issued by the RBI on behalf of the government. They offer an alternative to owning physical gold, with investors paying an issue price and receiving money on redemption.